10 home insurance questions to ponder during hurricane season

The sixth-month Atlantic hurricane season starts June 1. But are you and your hurricane-zone home fully prepared for it? Chances are, the answer is “no.”

The National Oceanic Atmospheric Administration predicts six major hurricanes will occur during the 2011 season. Researchers at Colorado State University put the number of major hurricanes at five. Forecasting company Weather Services International expects two to three hurricanes to make landfall in the United States in 2011. By contrast, the 2010 hurricane season was relatively quiet in the United States.

Millions of American homeowners could be in the path of hurricanes in 2011, as at least half of U.S. residents live in coastal areas (mostly along the Atlantic and Gulf coasts). By definition, “coastal” can mean as many as 50 miles inland.

To shore up your hurricane protection, ask these 10 questions regarding your home and your home insurance.

1. What type of home insurance do I need?

Standard homeowner’s policies typically don’t cover flooding caused by a hurricane’s storm surge. Furthermore, private insurers in some high-risk states — including Florida, North Carolina and Texas — have eliminated windstorm coverage from standard homeowner’s policies.Most flood insurance policies are sold through the National Flood Insurance Program. Only about 10 percent of American households have flood insurance.Keep in mind that there’s typically a 30-day waiting period after you buy a flood insurance policy before the coverage kicks in.Don’t wait until a storm forms to buy that separate windstorm policy, either: Insurers draw a “box” on the map of the Gulf and Atlantic coasts that extends well out into the ocean. Once a hurricane enters that “box,” you can’t buy a policy.

2. How much coverage do I need?

Your insurance policy can cover either the actual cash value or replacement value of your home. If your home is destroyed, actual-cash-value coverage provides an amount of money equal to the market price of your home. Replacement-value coverage provides enough money to rebuild your home. If you’ve done upgrades or additions to your home, replacement-value coverage may be the way to go.“I don’t think that it’s necessarily important to get as much insurance as you can,” says Lori Medders, associate director of the Florida Catastrophic Storm Risk Management Center at Florida State University. “The extra cost for getting as much insurance as might be available could be conceivably not worth it.”You should read the fine print of your insurance policy, and know what it does and does not cover.“Not being educated on policy terms and exclusions could lead to an unpleasant surprise if there’s a claim,” says Eric Shanks, senior vice president at Chartis Insurance.

3. How do I know whether the price for insuring my coastal home will rise or fall?

If you find an affordable premium, you should brace yourself for costs to double or perhaps triple down the road — even if a hurricane doesn’t come ashore, Medders warns. Why? Premiums are based on computerized catastrophe models approved by each state, so if those models predict more hurricane activity, your home insurance premiums could climb. By the same token, your premiums could drop if less hurricane activity is forecast.“Most primary insurers select average results from at least two out of three of the main catastrophe models available for rate-filing purposes, and in some cases all three of these models are used,” says David Smith, senior vice president at Eqecat, one of the biggest producers of catastrophe models.Once a catastrophe model is updated, it could take a year or so before that information affects your home insurance policy, Smith says.

4. What can I do if I’m having trouble getting windstorm coverage in a coastal area?

Residents of several coastal states can turn to insurers of “last resort” for windstorm coverage. While these state-backed insurers are meant to handle a limited number of policies where no other coverage options are available, many have become default carriers for coastal homeowners. After Hurricane Katrina, for instance, thousands of home insurance policies written by private insurers were canceled in Alabama, Louisiana and Mississippi because of the heightened financial risk.

“The closer you get to the beach, the fewer carriers you’ll find willing to write policies,” says Scott Jerome, assistant manager of the Mississippi Windstorm Underwriting Association, which has more than 46,000 policies in place in six coastal parishes.A note of caution: Coverage from state-governed windstorm insurers normally costs more than such coverage from private insurers. The Louisiana Citizens Property Insurance Corp., for example, sets its premiums about 10 percent higher than those of the highest-priced private insurer to avoid competition with the private market.

5. Does my home insurance policy have a windstorm or hurricane deductible?

Many insurers are selling home insurance policies with percentage deductibles for windstorm or hurricane damage instead of the traditional dollar deductibles, which are used for other types of losses such as fire and theft, according to the Insurance Information Institute.With a policy that carries a $500 standard deductible, for example, the policyholder must pay the first $500 of the claim out of pocket, the Insurance Information Institute says. But percentage deductibles — typically ranging from 1 percent to 5 percent — are based on the home’s insured value. So if a house is insured for $100,000 and has a 2 percent deductible, the first $2,000 of a claim must be paid out of the policyholder’s pocket.Hurricane deductibles are in place in Alabama, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas and Virginia.In some states, the percentage deductibles are mandatory, according to the Insurance Information Institute. In others, they’re optional. Check with your state insurance regulator for details.

6. Are my valuables covered if they’re lost in a hurricane?

Home policies cover pricey items, up to certain dollar limits. For maximum protection, you should have jewelry, furs, silverware and other valuables appraised, then “scheduled” separately on your policy, Liberty Mutual advises.

7. How will the insurance company know which of my belongings have been lost in a hurricane?

Before a disaster strikes, take an inventory of your personal property, Liberty Mutual recommends. Document this inventory with video or photos. Store this information and other important documents in a safe deposit box.

A home inventory will help you buy enough insurance to replace your possessions, and can help speed up the claims process and prove any losses for income tax purposes, according to the Insurance Information Institute. The institute offers free web-based inventory software at KnowYourStuff.org.

8. Do I have coverage for additional living expenses?

Additional living expenses may or may not already be included in your homeowner’s policy, Allstate says. This coverage helps pay for the extra costs of living away from home — such as food and lodging — if your place is uninhabitable after a hurricane (or some other kind of disaster).

9. What can I do to prepare for a hurricane evacuation?

One of the simplest things you can do is create an evacuation kit. Nationwide says this kit should include personal IDs or documents, such as Social Security cards, insurance policies, deeds, birth certificates and wills. If you have time before you hit the road, grab vital prescription medications, a first aid kit, bottled water, a radio and extra batteries. Keep car keys and maps handy.

10. What can I do to structurally prepare my home for a hurricane?

One of the parts of your home that’s most susceptible to hurricane damage is your roof. So if you have a shingle roof, you need to check whether the shingles are starting to curl, crack or break, according to the Insurance Institute for Business & Home Safety. If you have a metal roof, is the metal in good condition with no signs of rust, and is it anchored securely to the roof deck? If you have a tile roof, are any tiles broken, loose or displaced?

Julie Rochman, president and CEO of the Insurance Institute for Business & Home Safety, says: “There is no great mystery surrounding how to better equip residential and commercial structures for an active hurricane season. However, individuals and community leaders must make structural preparedness a priority, and take action now before a hurricane strikes.”